Sole Proprietor Tax Specialist

Profits Tax for a Registered Sole Proprietorship

Once you register a business you are in the profits tax system: a BIR52 every year, unincorporated two-tier rates on assessable profits, depreciation allowances on your equipment, and an offshore claim available where the work is genuinely performed outside Hong Kong.

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7.5% Profits tax rate first HKD 2M (unincorporated)
15% Standard profits tax rate above HKD 2M
HKD 2,000 Annual business registration fee

Sole Proprietor Tax Specialist

Once you register a business you are in the profits tax system: a BIR52 every year, unincorporated two-tier rates on assessable profits, depreciation allowances on your equipment, and an offshore claim available where the work is genuinely performed outside Hong Kong.

⚠️

⚠ Sole Proprietors Must File Profits Tax — Not Salaries Tax

A common mistake: sole proprietors who previously worked as employees try to file BIR60 (salaries tax) instead of BIR52 (profits tax). The two tax systems are separate. Filing the wrong form means missing legitimate business deductions and potentially being assessed incorrectly. As a sole proprietor, your "salary" from your own business is not a deductible expense — your profits are assessed in full after allowable business costs.

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Business Registration Compliance

All sole proprietors must register with the Business Registration Office (BRO) within 1 month of commencing business. Non-registration is a criminal offence.

⚠ Risk: Non-registration fine HKD 5,000 + 3 years' imprisonment

Profits Tax vs Salaries Tax

Sole proprietors pay profits tax on net business income — but can elect Personal Assessment to combine this with other income and claim additional allowances.

⚠ Risk: Missing Personal Assessment election → overpaying on combined income

What Counts as Allowable Expenses

Business expenses must be "wholly and exclusively" incurred in producing profits. Mixed personal/business costs require careful allocation.

⚠ Risk: IRD disallowing claimed expenses → higher assessed profits + penalties

Offshore Profits Claim

Profits from services rendered entirely outside HK are exempt from HK profits tax. The IRD requires strong evidence of offshore activities.

⚠ Risk: Unfounded offshore claim → IRD rejection + full assessment with interest
Für wen

Für wen dieser Service ist

Freelancers and independent consultants

Professionals operating without a company structure, invoicing clients directly in their own name.

Tradespeople and service providers

Plumbers, electricians, tutors, coaches, and other sole traders operating in HK.

Creative professionals

Designers, photographers, writers, and artists earning project-based income.

Professional practitioners

Lawyers, accountants, and surveyors in sole practice (not partnership or company).

Online business operators

E-commerce, dropshippers, and online service providers without a corporate structure.

Those transitioning from employment to self-employment

Former employees setting up on their own and needing to understand the switch from salaries to profits tax.

Unsere Leistungen

Was wir abdecken

Business Registration Setup

We advise on business name registration with the BRO and IRD notifications for profits tax purposes.

Including sole proprietorship vs partnership vs company comparison

Profits Tax Return Filing (BIR52)

We prepare your annual profits tax return with full profit and loss accounts.

Adjusted profits computation per IRO Schedules

Deductible Expense Optimisation

We identify all allowable business expenses, capital allowances, and depreciation claims.

Including home office proportion, vehicle costs, professional subscriptions

Offshore Profits Claim

Where business activities are conducted outside HK, we prepare a documented offshore income claim.

With travel records, client communications, and contract evidence

Growth & Incorporation Planning

When profits exceed HKD 2M, we model whether incorporation into a HK company provides tax savings.

Comparing 15% unincorporated rate vs 8.25% corporate rate on first HKD 2M
So funktioniert es

Einfach, effizient, professionell

1

Business Setup & Registration Advice

We advise on the most tax-efficient structure from day one of your business.

1 day
2

Bookkeeping & Records Review

We review your income and expense records for the tax year and identify missing documentation.

2–3 days
3

Profits Computation

We prepare a tax-adjusted profits computation with all allowable deductions and capital allowances.

2–3 days
4

BIR52 Filing & IRD Correspondence

We file your profits tax return and respond to any IRD follow-up queries.

As required
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Case Study

Independent IT consultant — HK and Singapore clients

HKD 127,000 Gespart
  • Annual profits HKD 980,000
  • 45% of work performed in Singapore
  • Offshore claim for Singapore work approved
  • Assessable HK profits reduced to HKD 539,000
"TAX.hk prepared a thorough offshore claim with travel records and client emails. The IRD accepted it first time."
Verifizierter Kunde Case Study
Case Study

Freelance designer transitioning from employment

HKD 43,000 in first year Gespart
  • Year 1 self-employment profits HKD 360,000
  • Equipment, software, co-working space deducted
  • Personal Assessment election made
  • Spouse allowance and mortgage interest also claimed
"I had no idea I could use Personal Assessment to combine my business profits with mortgage deductions. Game changer."
Verifizierter Kunde Case Study
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Warum wir

Warum TAX.hk

Tiefe HK-Steuerexpertise

Unsere CPAs verfügen über mehr als 15 Jahre HK-Steuererfahrung und verfolgen jedes IRD-Update.

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FAQs

Häufig gestellte Fragen

Schnelle Antworten auf Ihre Fragen

For unincorporated businesses (sole proprietors and partnerships), the two-tiered profits tax rates apply: 7.5% on the first HKD 2 million of assessable profits, and 15% on profits above HKD 2 million. This is effectively a half-rate for the first HKD 2M compared to incorporated companies (8.25% / 16.5%).

No. You cannot pay yourself a deductible salary as a sole proprietor — you and the business are the same legal entity. Your entire net profit (after allowable business expenses) is assessed to profits tax. This is one of the key reasons profitable sole proprietors often incorporate — to enable a deductible director's salary.

Allowable deductions include: rent for business premises, employee salaries and MPF, professional services (legal, accounting), business insurance, marketing and advertising, professional subscriptions, trade-specific equipment depreciation, and a proportion of home office costs where your home is your principal place of business.

You need to demonstrate that the profit-generating activities — i.e., the services that earned the income — were performed outside HK. Evidence includes: overseas travel records, client meeting minutes, contracts signed abroad, foreign bank statements, and communications showing work was done offshore. The claim is made in your profits tax return with a covering letter.

You must register with the Business Registration Office (BRO) within 1 month of commencing your business. The annual registration fee is HKD 2,000 (plus a HKD 450 levy) for the first year. You must also notify the IRD that you have commenced a business, triggering your profits tax filing obligations.

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